Says decision on viability of the unit should be taken not later than three months of the unit becoming sick

The Reserve Bank of India (RBI) has revised the guidelines on rehabilitation of sick micro and small enterprises to hasten the process of identification of such units by commercial banks.

Based on the recommendations of the working group chaired by Deputy Governor K. C. Chakrabarty, the RBI has suggested that an MSE is considered ‘sick’ when: any of the borrowal account of the enterprise remains a non-performing asset (NPA) for three months or more; or if there is erosion in the net worth due to accumulated losses to the extent of 50 per cent of its net worth during the previous accounting year.

The stipulation that the unit should have been in commercial production for at least two years has been removed.

The central bank said that the decision on viability of the unit should be taken at the earliest and not later than three months of the unit becoming sick. It also laid down the procedure for declaring a unit as unviable and defined the concept of ‘incipient sickness’.

“Timely and adequate assistance to MSEs and rehabilitation effort should begin on a proactive basis when early signs of sickness are detected, the RBI said in a statement.

beena.parmar@thehindu.co.in

(This article was published on November 1, 2012)
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